LANDLORDS: THE ATTORNEY FEES CLAUSE IN YOUR LEASE MAY BE A TRAP

If your tenant has a lease, chances are it contains a clause allowing you to collect attorney fees if you are the successful party in litigation arising out of the lease or the tenancy. Most often, that would be an eviction proceeding in housing court. That clause may wind up causing you headaches and costing you money.

While, typical leases give the landlord a right to collect attorney fees after a successful eviction proceeding, most do not give the tenant the same right if the landlord is not successful. It may appear then that the tenant’s cost to defend against your action is not your problem. Not so.

Real Property Law §234 provides that if a lease for residential property allows the landlord to collect fees, the tenant shall also have that right if they are the prevailing party in litigation arising out of the lease, whether or not the lease allows for it. The intent of the law was to level the legal playing field between landlord and tenant. A tenant could now think about mounting a more expensive defense if the landlord might have to pay the fees. In most situations, a landlord has very little incentive to have that clause in the lease.

Most eviction proceedings in Queens and Brooklyn are started because tenants are not paying rent. Those actions could be non-payments, where the landlord is suing for rent, or holdover proceedings where the landlord wants to evict the tenant regardless of whether or not rent is paid. Most tenants who don’t pay rent don’t have money. In small houses that are not regulated by rent stabilization, there is very little chance of collecting back rent and the goal of most of these eviction proceedings is to have the tenant move. Tenants who don’t have money to pay rent, also don’t have money to pay legal fees. While you might be able to get a judgment for your fees after spending extra money on a trial, there is very little chance you will be able to collect. On the other hand, if you lose, a successful tenant will probably be able to enforce a judgment for fees against you.

The solution for small, unregulated landlords is don’t give leases. If you do decide to give your tenant a lease, you may want to consider removing the legal fees clause. If you have rent stabilized tenants, you cannot change any of the terms on renewal but for new tenants, leases do not have to have a fee clause.

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